SHANGHAI — The business of making cars has reached a critical juncture — and it looks as if China is in the driver’s seat.
General Motors’ surprise announcement Thursday that it aspires to eliminate gasoline and diesel cars from its fleet by 2035 and embrace electric cars follows a road map successfully drawn by Beijing. To get there, GM, the Detroit stalwart and symbol of American industrial might, may have no choice but to embrace car and battery technologies in which Chinese companies play leading roles.
Even when setting the time frame, GM seems to be matching Beijing’s speed. Just three months ago, Chinese policymakers ordered that most vehicles sold in China must be electric by 2035.
“When it comes to global automakers’ electric vehicle plans, all roads lead back to Beijing,” said Michael Dunne, a former president of GM’s Indonesia operations.
Precisely how GM will shift its industrial capacity isn’t entirely clear, and the company declined Friday to comment on what influence Beijing’s policies may have had in its planning. It didn’t mention China in its announcement Thursday.
It didn’t have to. China has the market clout and the steadiness of regulatory policy to influence automotive decisions made from Detroit to Tokyo to Wolfsburg, Germany.
China already is by far the world’s largest car market, accounting for a third of global sales. It is bigger than the U.S. and Japanese auto markets combined. GM and Volkswagen both sell more cars through joint ventures in China than in their home markets.
But China’s sway also extends to the business of making electric cars. Worried about its own pollution problems and keen to stay competitive in the technologies of the future, Beijing has long lavished subsidies on its electric car industry. During the global financial crisis a dozen years ago, China was already offering its taxi fleets and local government agencies up to $8,800 per car to choose electric models.
Today, China is the leading maker of big battery packs for electric cars, producing considerably more than the rest of the world combined. Chinese regulations required until a year ago the use of Chinese battery suppliers, instead of their mostly Japanese and South Korean rivals, for electric cars sold with Chinese subsidies. That forced multinationals to place huge orders with CATL, the main Chinese producer.
Chinese companies dominate the world’s production of electric motors. China has even gained control of much of the world’s production of key raw materials needed for electric cars, including lithium, cobalt and minerals known as rare earth metals.
Major global automakers are already developing electric cars in China. Daimler and Toyota have jumped into extensive joint ventures with Chinese manufacturers to build electric cars. Ford Motor announced Thursday that its new Ford Mustang Mach-E, the most head-turning car at the Beijing auto show in autumn, will be made in China as well as Mexico.
So far, no Chinese company has produced an electric car that can rival Tesla in capturing the world’s imagination, although one, NIO, is trying. But China has completed many of the steps along that road. Notably, Tesla began making vehicles in a factory in Shanghai a year ago.
The world’s shift to electric cars “is based on the Chinese technological road map,” said Yunshi Wang, director of the China Center for Energy and Transportation at the University of California, Davis.
GM’s Thursday announcement validates China’s long bet on electric cars. Just a few years ago, American carmakers were committed to gasoline engines. German automakers were pushing diesels. Japanese companies were emphasizing gasoline-electric hybrids.
China chose battery-powered electric cars. It announced in 2017 that it was phasing out fossil fuels for cars by a then-unspecified date. Many in the industry were skeptical.
Mary Barra, chief executive of GM, flew to Shanghai two weeks later and declared that while GM planned to put more electric cars on the road, the company believed that consumers, not governments, should decide when to stop buying gasoline- and diesel-powered models.
“I think it works best when, instead of mandating, customers are choosing the technology that meets their needs,” she said.
China has taken a different approach. Given the cost and complexity of developing electric cars, the government has set big targets and offered the support to help its companies meet them.
When it comes to the car industry, “the most important thing is what the government does,” said Liu Jing, a professor at the Cheung Kong Graduate School of Business in Beijing.